“Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we.” - George W. Bush

Tuesday, March 26, 2013

Are 92% of all Americans wrong about what they believe to be the equitable distribution of wealth in the USA?

Income declining, inequality rising: Federal Reserve

By Bill Knight

Retired WIU Journalism Professor

Mar. 7, 2013 12:06 pmIncome from working "has been declining as a share of total income earned in the United States for the past three decades," according to a new analysis on income inequality from a very unlikely supporter of economic justice: the Federal Reserve.

It adds that the income share from "capital," in contrast, has been increasing.

This new analysis from the Federal Reserve Bank of Cleveland examines both "labor" and "capital" income in America since 1980. "Labor" income includes all compensation from jobs: wages and salaries, pensions and benefits. "Capital" income comes not from working but from owning: ownership of assets, including interest, dividends and the capital gains from buying and selling stocks, bonds and other forms of property.

The end result, according to the piece by Margaret Jacobson and Filippo Occhino: Americans have been making less from work and more from wealth. But only a relative few Americans, the Cleveland Fed shows, have significant quantities of such wealth. The unsurprising consequence is that U.S. society has undergone a significant "spike in inequality" over the past generation.

Both authors are with the Research Department at the Federal Reserve Bank of Cleveland. Jacobson is a research analyst and Occhino a senior research economist.

One outcome of labor's declining share has particularly raised concerns, they write. Since labor income is more evenly distributed across U.S. households than capital income, the decline made total income less evenly distributed and more concentrated at the top of the distribution, and this contributed to increased income inequality.

"We look at three different data sources and each provides broad evidence of the decline," they explained, "According to data from the Bureau of Economic Analysis, labor's share of gross national income fluctuated around 67 percent during the 1980s, 1990s and early 2000s, but it has declined since then and now stands at 63.8 percent. According to the Bureau of Labor Statistics, the ratio of compensation to output for the nonfarm business sector fluctuated around 65 percent until the early 1980s and has declined steadily since, from 63 percent during the 1980s and 1990s to 58.2 percent most recently. Finally, a 2011 study of income tax returns and demographic data by the Congressional Budget Office finds that labor's share of income decreased from 75 percent in 1979 to 67 percent in 2007.

"These three data sources … agree in indicating a significant drop of 3 to 8 percentage points in labor's share of income since the early 1980s, with the trend accelerating during the 2000s," they note. "As a result, total income inequality rose."

Inequality declined "up to the late 1970s," the continued, "but it has since reversed course. It rose sharply during the 1980s and early 1990s and currently is at near record-high levels."

Inequality affects a variety of other important economic variables, such as the composition of consumption and investment, tax revenue and government spending, government policies, economic mobility, human capital accumulation, and growth, the researchers say. Some economists have suggested that rising income inequality contributed to the debt accumulation and financial imbalances that led to the recent financial crisis.

"And, of course, income inequality is the focus of much attention as an indicator, albeit imperfect, of the inequality of lifetime income and welfare across households," they write.

29 comments:

The question begs the answer: If 92% of those Americans polled believe that wealth distribution is so radically different from the desired distribution, something is wrong.

Perceived “wrongs” have consequences, especially in this instance. It explains the vast expansion of food stamps, disability insurance, subsidies, extended unemployment, Obamacare and a general gaming of the system.

What caused this?

What should be done about it?

Is it just the normal state of affairs or is it the result of crony capitalism and a corrupt system of spoils and favors?

All the old cattle and sheep ranching around here is gone, buried by the feed lots in the mid west. And those guys really worked. Forestry still hangs on, a little. Even the local governments have made developing so expensive it is hardly worth it. Farming has fewer and fewer involved.

The way out?

Around here, become a professor of something or other.

Go into Solutrean Studies on some grant, if you can grease the skids.

In a nation so large and diverse, tax policy itself is just a part of it.

What is the goal anyway?

Equality?

What is that, from the Bronks to Boise?

I am waiting for a system that allows an older man and wife to have a pickup and camper at the end of their lives.

I have, for instance, an old friend, down in Las Vegas, whose husband is an ex Marine. Perfect American. He was in the supply business to the local builders, mostly plumbing. He got wiped out in the latest down turn, liquidation. They have both worked their asses off their whole lives. He is now thinking off what to do next. They need to supplement Social Security

Humans are, by nature, "obsessive." A business owner that extracts 99% of the value from a business (compared to the workers) will, many times, spend sleepless night after sleepless night, trying to figure out how to get it to 99.5%.

All you ever hear about is “shareholder value”. A good friend of mine, long passed away, Hal Whitman, father of Meg Whitman, knew the rich and moneyed class as well as anyone I ever knew. We both worked together for a subsidiary of a major New York Bank. Hal had a beautiful home in Cold Spring Harbor, Long Island, and an apartment on Madison Avenue. He was a regular member of the Harvard Club and often took me there for lunch.

He understood finance from every level and how the very wealthy through trusts, charities, tax lawyers and politicians gamed the system to their own benefit. He was also convinced that the only fair tax system was a 100% death tax less a reasonable deduction for widows and small children. All other taxes would end. Maybe that would work.

Note: If I could meet revive Hal and take him for a drink and tell him what his “Meg” accomplished, he would be astounded.

Magnificent Ronald and the Founding Fathers of al Qaeda

“These gentlemen are the moral equivalents of America’s founding fathers.” — Ronald Reagan while introducing the Mujahideen leaders to media on the White house lawns (1985). During Reagan’s 8 years in power, the CIA secretly sent billions of dollars of military aid to the mujahedeen in Afghanistan in a US-supported jihad against the Soviet Union. We repeated the insanity with ISIS against Syria.